Quarterly report pursuant to Section 13 or 15(d)

Interim Segment Information (Notes)

Interim Segment Information (Notes)

6 Months Ended

Sep. 30, 2018

Segment information is presented in accordance with a “management approach", which designates the internal reporting used by the chief operating decision-maker (CODM) for making decisions and assessing performance as the source of the Company's reportable segments. Westell’s Chief Executive Officer is the CODM. The CODM continues to define segment profit as gross profit less research and development expenses. The accounting policies of the segments are the same as those for Westell Technologies, Inc. described in the summary of significant accounting policies included in the Company's Annual Report on Form 10-K for year ended March 31, 2018 and as updated in this filing.

The Company’s three reportable segments are as follows:

In-Building Wireless (IBW) Segment

The IBW segment solutions enable cellular coverage in stadiums, arenas, malls, buildings, and other indoor areas not served well or at all by the existing "macro" outdoor cellular network. For commercial service, the IBW segment solutions include distributed antenna systems (DAS) conditioners and digital repeaters. For the public safety market, the IBW segment solutions include half-watt and two-watt repeaters and a battery backup unit. The Company’s IBW segment also offers ancillary products that consist of passive system components and antennas for both the commercial and public safety markets.

Intelligent Site Management (ISM) Segment (formerly Intelligent Site Management and Services or "ISMS")

The ISM segment solutions include a suite of remote units, which are network devices used for on-site processing. Remotes provide on-site machine-to-machine (M2M) communications that enable operators to remotely monitor, manage, and control site infrastructure and support systems. Remotes can be and often are combined with the Company’s Optima management software system. The Company also offers support services (i.e., maintenance agreements) and deployment services (i.e., installation).

Communications Network Solutions (CNS) Segment

The CNS segment solutions include a broad range of outdoor network infrastructure offerings consisting of integrated cabinets, power distribution products, copper and fiber connectivity panels, T1 network interface units (NIUs), and tower mounted amplifiers (TMAs).

Segment information for the three and six months ended September 30, 2018, and 2017, is set forth below:



	Three months ended September 30, 2018
(in thousands)	IBW			ISM			CNS			Total
Revenue	$	3,646		$	2,646		$	3,814		$	10,106
Cost of revenue	1,954			1,224			2,735			5,913
Gross profit	1,692			1,422			1,079			4,193
Gross margin	46.4		%	53.7		%	28.3		%	41.5		%
Research and development	867			558			418			1,843
Segment profit	$	825		$	864		$	661		2,350
Operating expenses:
Sales and marketing										1,876
General and administrative										1,400
Intangible amortization										832
Operating profit (loss)										(1,758		)
Other income, net										165
Income tax benefit (expense)										(10		)
Net income (loss) from continuing operations										$	(1,603	)

	Three months ended September 30, 2017
(in thousands)	IBW			ISM			CNS			Total
Revenue	$	7,919		$	4,730		$	4,583		$	17,232
Cost of revenue	4,269			2,511			3,177			9,957
Gross profit	3,650			2,219			1,406			7,275
Gross margin	46.1		%	46.9		%	30.7		%	42.2		%
Research and development	1,443			523			239			2,205
Segment profit	$	2,207		$	1,696		$	1,167		5,070
Operating expenses:
Sales and marketing										1,992
General and administrative										1,809
Intangible amortization										1,048
Restructuring										165
Operating profit (loss)										56
Other income, net										677			⁽¹⁾
Income tax benefit (expense)										(13		)
Net income (loss) from continuing operations										$	720
⁽¹⁾ During the quarter ended September 30, 2017, the Company dissolved the NoranTel legal entity, which triggered a one-time foreign currency gain with the reversal of a cumulative translation adjustment. See Note 1.




	Six months ended September 30, 2018
(in thousands)	IBW			ISM			CNS			Total
Revenue	$	7,203		$	8,390		$	7,550		$	23,143
Cost of revenue	3,849			4,020			5,146			13,015
Gross profit	3,354			4,370			2,404			10,128
Gross margin	46.6		%	52.1		%	31.8		%	43.8		%
Research and development	1,389			1,127			759			3,275
Segment profit	$	1,965		$	3,243		$	1,645		6,853
Operating expenses:
Sales and marketing										4,013
General and administrative										2,934
Intangible amortization										1,822
Operating profit (loss)										(1,916		)
Other income, net										284
Income tax benefit (expense)										(10		)
Net income (loss) from continuing operations										$	(1,642	)

	Six months ended September 30, 2017
(in thousands)	IBW			ISM			CNS			Total
Revenue	$	14,875		$	8,860		$	10,071		$	33,806
Cost of revenue	8,211			4,515			7,038			19,764
Gross profit	6,664			4,345			3,033			14,042
Gross margin	44.8		%	49.0		%	30.1		%	41.5		%
Research and development	2,906			1,088			487			4,481
Segment profit (loss)	$	3,758		$	3,257		$	2,546		9,561
Operating expenses:
Sales and marketing										4,328
General and administrative										3,520
Intangible amortization										2,095
Restructuring										165
Operating profit (loss)										(547		)
Other income, net										720			⁽¹⁾
Income tax benefit (expense)										(25		)
Net income (loss) from continuing operations										$	148

⁽¹⁾ During the quarter ended September 30, 2017, the Company dissolved the NoranTel legal entity, which triggered a one-time foreign currency gain with the reversal of a cumulative translation adjustment. See Note 1.

Segment asset information is not reported to or used by the CODM.